TORONTO – Nexen is considering its own liquefied natural gas project on the West Coast, leveraging its 30,000 acres of shale gas deposits in northeast British Columbia and parent company CNOOC’s considerable expertise in the transportation of natural gas.

After missing out on the oil sands boom and selling many of its assets in Western Canada about a decade ago, San Ramon, Calif.-based Chevron is stepping back into its historic leadership role to build and run the first large liquefied natural gas facility on the West Coast, Kitimat LNG, while taking on the Duvernay shale gas play in Alberta.

“It’s an exciting time within Chevron Canada,” said Jeffrey Lehrmann, who took over as president of Chevron’s Canadian unit in 2010.

The plans are fueling a hiring spree to increase its workforce in Calgary in the next couple of years to 800 people, from about 500 today and 200 in 2010.

Final corporate approval for the Kitimat LNG project is still 18 to 24 months away, but Chevron is preparing by opening an office in Vancouver to handle relations with the provincial government and local communities, is ramping up its presence in Kitimat and is expanding the team in Houston working on the project’s design.

After years of purchases by Asian energy companies in Western Canada, the recommitment of Chevron to its Canadian business suggests a new theme — oil majors are taking a second look at Canada, buoyed by Canada’s unconventional resource potential, its emerging LNG business and in response to federal and provincial governments’ aggressive campaigns to promote resource development and cultivate new markets. Both Chevron and Exxon Mobil Corp. made big acquisitions in Western Canada this year, elbowing out Asian companies as the big spenders.

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Like other majors, Chevron is well-acquainted with Canada. Seventy-five years ago it set up its first office in Calgary’s Palliser Hotel. Over the years, the company made some of Canada’s top frontier oil and gas discoveries — including the Hibernia oil field offshore Newfoundland.

Mr. Lehrmann, a 50-year-old petroleum engineer from Texas, said Chevron put Canada back on its priority list in 2009, encouraged by exploration in the Duvernay. Today, Chevron has 325,000 acres in the condensate-rich play, partly acquired from the Crown and partly through its recent acquisition of Alta Energy, a private company. The price was not disclosed, but it was rumoured to be in the $1-billion range.

But the head-turning leap came with its entry into Kitimat LNG in February, which injected confidence that the long-delayed project had a serious chance of lift-off. Chevron, already involved in the Gorgon and Wheatstone LNG projects in Australia, took over EOG Resources Inc. and Encana Corp.’s interest to become a 50% owner with Apache Corp. In July, Chevron also took over as the operator. The deal gives the company 50% of the proposed Pacific Trail Pipeline, and 50% in approximately 644,000 acres in B.C.’s Horn River and Liard Basins.

Mr. Lehrmann said Kitimat LNG will draw natural gas from the Horn River and Liard basins and involve a liquefaction facility with two trains able to export two billion cubic feet a day. As production increases, exports could be expanded. The anchor plays are so large there is no requirement for further acquisitions, he said.

“We are very pleased with where we are,” he said in a rare interview. Based on “early works and our permits, we are probably a year to a year-and-a-half ahead of other projects. We are in a window from 18 to 24 months … to get us the confidence that we and our co-owners, Apache, can make a funding and investment decisions. The key will be the marketing. We will need the assurance and the commitment for a volume of gas over a term that we feel comfortable we can make that multi-billion commitment to build that facility.”

During that time window, Chevron hopes to nail down fiscal terms with the B.C. government, finalize the design, make progress with site preparation in Kitimat, and conclude marketing arrangements with Asian buyers.

The project’s previous operators tried for years to lock up the arrangements, but disagreements over the price of LNG stood in the way. Asian buyers have made it clear they are interested in Canada’s supplies, as long as they don’t have to pay the high prices linked to oil they have had to take from other suppliers so far.

Mr. Lehrman said Chevron is capitalizing on relationships in Asia built with its Australian projects. He believes a meeting of interests between Asian buyers and Canadian producers is possible by linking LNG prices to a stable, mutually-beneficial price index so that both sides get the value they require. If everything unfolds as planned, the first LNG shipments will be ready at the end of the decade — ahead of other plants, but far behind previous expectations.

At the same time, Chevron will be moving to commercial development of the Duvernay, whose condensate is used as a diluent to transport bitumen produced in the oil sands.

It will also help steer Canadian projects in which it has big interests but that are run by others: the Hibernia field, which is still producing and expanding; the Hebron heavy oil project offshore Newfoundland, which is in construction and aiming for first oil in 2017; exploration in the Orphan Basin, also in Newfoundland’s offshore. In the Beaufort Sea, Chevron is a partner in the Amauligak discovery, which is estimated to contain 235 million barrels of oil equivalent. Mr. Lehrman said it could move to development later this decade and use gravity-based structures similar to those at Hebron and Hibernia. Oil would be shipped on tankers to global markets.

As for the oil sands, Chevron is happy with its position as a partner in the Shell-led Athabasca Oil Sands Project, but remains on the lookout for in-situ opportunities.

“We have been a world leader in heavy oil thermal recovery for years, in Indonesia and California, and so we missed out on those opportunities early on,” Mr. Lehrmann said. “But we always keep our eyes open for opportunities to enter — if the value proposition is right.”

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